Fraudsters are! The article below takes a close, shocking look at the rising fraud specific to Medicare’s Part D prescription drug program, and the devastating effects it has on Medicare AND beneficiaries. Spending in the Part D program has more than doubled in 8 years, from $51 billion in 2006 to $121 billion in 2014, and that’s not all due to a legitimate increase in use of the benefit and is a significant tax on the financial health of the program. Part D fraud can also have direct harmful effects on beneficiaries as noted in some of the Office of Inspector General’s recent convictions. For example, several providers have actually harmed beneficiaries through false diagnoses and giving them unnecessary drugs, many of them high cost and high risk drugs for cancer or HIV.

According to the Centers for Medicare and Medicaid Services’ (CMS) Fast Facts, the Medicare Part D program, which provides coverage for prescription drugs, spent $78.1 billion on 1.4 billion prescriptions for over 37 million people in 2014. The Health & Human Services Office of Inspector General (OIG) puts total Part D costs for 2014 in the neighborhood of $121 billion. (See Figure 1, below.) That’s a lot of zeros. That’s also a juicy opportunity that Medicare scam artists can’t seem to pass up.

Nuritsa Grigoryan, an OIG fugitive convicted of five different health care fraud-related charges, worked with coconspirators to generate thousands of prescriptions for expensive antipsychotic medications. Patient recruiters working for Grigoryan lured Medicare beneficiaries with cash payments, had them fill phony prescriptions, and then returned them to Grigoryan’s company. The outfit also stole Medicare identities to fill unneeded prescriptions. The “pill mill” scheme was estimated at $20 million.

Fraud is not only costly, it can hurt. In 2015, Detroit oncologist (cancer specialist) Dr. Farid Fata was convicted of providing unnecessary cancer treatments, iron infusions, and other injections and infusions to 553 patients who never needed them. Fata also set up an in-house pharmacy, Vital Pharmacare, and required all of his patients to fill their prescriptions with him instead of using other retail pharmacies. While most injected and infused drugs for cancer are billed to Medicare Part B, many drugs taken by cancer patients for treatment or to control side effects are covered under Part D. Many of Fata’s patients suffered serious, life-altering side effects as a result of unnecessary treatments. The estimated cost to Medicare and other insurers was approximately $34 million.

A big Medicare prescription drug fraud conviction in 2015 was against a Michigan pharmacy. Six convicted pharmacists took unused patient drugs from 800 nursing and adult foster homes, returned them to the pharmacy supply, then redispensed the medications to other patients. They billed insurers over $79 million for the misbranded and adulterated drugs, some of which were the wrong dose or wrong drug.

According to testimony from Ann Maxwell, an OIG assistant inspector general, to the U.S. House of Representatives on July 14, 2015, Part D investigations marked $720 million for return to Medicare. This is the result of 370 criminal and civil actions from fiscal years 2012-2014. A related report noted that as of May 2015 the OIG had 540 pending Part D complaints and cases and had seen an increase of 134 percent since 2010. These civil and criminal actions are likely just the tip of the iceberg.

As a result, the OIG FY 2017 budget justification listed Medicare prescription drug diversion and fraud among its priorities. The budget includes a request for an additional $68 million. These funds would help pay for an additional 172 more full-time equivalent employees to assist with Medicare and Medicaid oversight. The OIG uses funds to investigate and prosecute criminal and civil cases, conduct audits and evaluations, and offer legal guidance and recommendations on Medicare and Medicaid programs.

Examples of past OIG findings include:

Identification of 1,600 Medicare beneficiaries who received $32 million in prescriptions for HIV drugs who didn’t have an HIV diagnosis in their medical records, received an excessive supply of drugs, or obtained drugs from a large number of pharmacies.

Over $1 billion in Part D plan payments made even though evidence of a legitimate Medicare provider identifier didn’t exist, including prescriptions written for medications by massage therapists and athletic trainers who aren’t licensed to write drug prescriptions.

Medicare beneficiaries are often the victims but can also be the perpetrators of fraud. Cases include beneficiaries who took cash payments or incentives in exchange for filling prescriptions they didn’t need or let doctors perform unnecessary medical procedures in exchange for narcotics.

While federal law doesn’t allow refills for schedule II drugs (like narcotic medications), Medicare was billed for $25 million in refills for these drugs.

Inadequate systems are in place to prevent payments for prescriptions that continue to be filled after Medicare beneficiaries have died.

These findings, and others, were accompanied by recommendations to CMS to strengthen program integrity and fraud detection efforts.

Tom O’Donnell, an assistant inspector general, stated that OIG concerns related to Part D are aimed at costs to taxpayers, medical identity theft, patient harm, and rising opioid (narcotic) deaths. Opioid abuse and diversion was also listed as a priority in the FY 2017 budget report.

According to the OIG budget justification, CMS is the single largest health insurance program in the country, accounting for $836 billion in spending for the Medicare and Medicaid programs in 2015. These numbers will rise as baby boomers continue to age into Medicare and Medicaid programs continue to expand. The OIG predicted an additional 18 million people enrolled in Medicaid by 2018. CMS predicts the number of Medicare beneficiaries will hit 57 million by the end of 2016, with 41 million of those people taking advantage of Medicare Part D insurance.

As Medicare enrollment numbers swell, so, too, will the cost of the Medicare Part D program. Fraud fighters need to be poised to thwart crooked providers looking to take advantage of unsuspecting beneficiaries and steal from the Medicare Trust Fund.

About Karen Fletcher

Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.

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